Scenario

After losing his job as an Assistant Chef at a small restaurant in Brisbane, Jeff embarked on a plan to operate a small caf that would offer crepes, pastries and coffee. He would call it Brayzee Caf.

Jeff realised that he would need a commercial coffee machine for his new business and contacted the Elkwood Distributors Pty Ltd (hereinafter Elkwood) which supplies Magganu commercial coffee machines. (Elkwood has about 40 employees in Australia.)

Jeff found out that a Magganu base model sells for $8,500. Elkwood offered to provide Jeff one of its brand-new Magganu base models on the condition that Jeff take delivery of $500 worth of coffee supplies from the company each month for a period of 24 months. After that period, ownership over the coffee machine would be transferred to Jeff. In the event, however, that Jeff failed to take delivery of $500 worth of coffee supplies from the company in any month, he would be in breach of his obligations. Failure on his part to remedy the breach within 30 days from demand by Elkwood would enable Elkwood to demand payment of the full cost of $8,500 for the coffee machine plus $2,500 in termination fees and interest.

Jeff orally agreed to the above terms. The parties also orally agreed that in the event of a dispute arising from their agreement, they would submit their dispute to arbitration.

Question

Six months after their dispute arose, Jeff and Elkwood formalised their earlier oral agreement to enter into arbitration in case of dispute. Their written agreement contained the following clause:

If a dispute arises from our agreement, a party to the agreement must not commence court or arbitration proceedings relating to the dispute unless that party has participated in a mediation. If the dispute is not settled within 30 days of referral to mediation (unless such period is extended by agreement of the parties), it shall be and is hereby submitted to arbitration.

When Jeff and Elkwood still failed to resolve their dispute after negotiating with each other, Elkwood commenced a civil action in court without first referring their dispute to mediation. Advise Jeff about the legal implication, if any, of the civil action notwithstanding the failure of Elkwood to comply with the arbitration clause under their written agreement.

citation

Commercial Arbitration Act 2013 (Qld)

Alternative Dispute resolution QLD

Medication

negotiation

Arbitration